Johnson & Johnson (NYSE:JNJ) announced that it will acquire Shockwave Medical (NASDAQ:SWAV) for $13.1 billion, including acquired cash. Shares of SWAV were up in pre-market trading. According to the terms of the agreement, JNJ will acquire all outstanding shares of Shockwave for $335 per share in cash. The acquisition is expected to close by the middle of this year.
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Shockwave is a provider of innovative intravascular lithotripsy (IVL) technology for the treatment of calcified coronary artery disease (CAD) and peripheral artery disease (PAD).
Rationale Behind the Deal
This acquisition is expected to strengthen Johnson & Johnson’s presence in cardiovascular intervention and will enable it to expand into high-growth markets. Moreover, the deal is expected to expand the pharmaceutical company’s MedTech cardiovascular portfolio into the highest-growth CAD and PAD segments.
Additionally, the deal is projected to be accretive to the operating margin for both Johnson & Johnson, and the company’s MedTech business. The company expects the deal to be “operationally accretive” upon closing, but the impact of financing costs could dilute its adjusted earnings per share by around $0.10 in FY24 and by $0.17 in FY25.
Is JNJ a Buy or Sell?
Analysts remain cautiously optimistic about JNJ stock, with a Moderate Buy consensus rating based on seven Buys and six Holds. Over the past year, JNJ has declined by more than 5%, and the average JNJ price target of $178.85 implies an upside potential of 17.3% at current levels.
